The SFO launched a criminal inquiry in August into Airbus’ use of third-party agents to win commercial jet sales after the company’s compliance teams informed Britain’s export credit agency, which arranges credit guarantees for overseas sales, of inaccuracies.

“We have spoken to the French and continue to do so,” SFO head David Green told Reuters. He declined to say whether the agency was also in contact with the U.S. Department of Justice, saying only it would “speak to any interested party.”

The case involves discrepancies over the amount of agents’ fees disclosed in applications for export support, or missing names of third parties, in some cases dating back several years, two people familiar with the matter have said.

Airbus eadsy has said it is cooperating with inquiries but Green said it was too early to say whether Airbus would qualify for any offer of a Deferred Prosecution Agreement (DPA), in which a company accounts for alleged offending to a criminal court and, if a judge agrees, can settle the case with a fine.

Big Cases to Wrap Up

Most companies investigated by the SFO say they are fully cooperating with the authorities, although Green said this was not always strictly accurate.

But he agreed that Britain’s Tesco teso was cooperating with a criminal inquiry into accounting practices, launched after the supermarket chain said it overstated half year profits in August 2014 by about 260 million pounds ($320 million).

Three former Tesco executives were charged with fraud and false accounting in September and have since denied the allegations, but the wider investigation is continuing. The SFO would decide “in the fullness of time” if a DPA were appropriate in that case, Green said.

Tesco Board Chairman to Step Down

Since Green took charge in 2012, the SFO has been restructured and re-focused to rebuild confidence in its crime-fighting abilities. He aims to wrap up the big cases kicked off on his watch by the time he steps down in April 2018.

The SFO’s success in securing three convictions of former traders for Libor interest rate rigging in July, bringing its convictions in the high-profile case to five, came after heavy criticism for its handling of cases such as the collapse of the corruption trial of businessman Victor Dahdaleh in 2013 and that of six brokers acquitted of alleged Libor fixing.

The agency will come under scrutiny again next year when another two former Libor traders face a re-trial after a jury was unable to reach a verdict. Six more former traders face a separate trial over Euribor rigging charges next year.

Meanwhile, separate inquiries into how Barclays secured a multi-billion pound emergency financing from Qatari investors in 2008 and the possible manipulation of Bank of England liquidity auctions in the same year are on track to be completed this year, Green said.

A lawyer for the SFO said in May that the agency expected to decide by early 2017 whether to bring any criminal charges in the Barclays case – a drawn-out investigation that Green said proved “the resolve” of the SFO.

]]>http://fortune.com/2016/10/12/airbus-uk-fraud-agency-sfo-inquiry/feed/0Airbus A320 2013jppullenWalmart Rejects Paying $600 Million Settlement in Bribery Investigationhttp://fortune.com/2016/10/07/walmart-bribery/
http://fortune.com/2016/10/07/walmart-bribery/#respondFri, 07 Oct 2016 21:35:45 +0000http://fortune.com/?p=1821901]]>The U.S. government recently proposed a $600 million settlement for Walmartwmt to close a bribery investigation, but the retailer refuses to pay.

The Justice Department and Securities and Exchange Commission have been investigating Walmart for foreign corruption allegations for the past five years, Bloomberg reports. Officials have offered to end the investigation if Walmart would pay the settlement, but the company has rejected the offer. If the retailer had paid, it would have been the largest settlement in a foreign corruption case since the U.S. implemented laws 40 years ago that prohibit bribery of foreign officials for business purposes.

This means that Walmart and the government are now at an impasse, so the latter is now attempting to gather more evidence regarding bribery in Mexico to strengthen its case. Specifically, the Justice Department and SEC are looking into allegations that Walmart bribed Mexican officials to hasten the process of receiving zoning and building permits. According to Bloomberg, some of the behavior officials are investigating may be past the statute of limitations.

A Walmart spokesperson told Bloomberg, “As we've said from the beginning, we are cooperating fully with the government in this matter and have no further comment on that process.” Officials are hoping to close this investigation before a new administration takes over in the new year.

Adding up expenses for its own internal investigation as well as legal fees, Walmart has already spent about $791 million on this case. “Although we do not presently believe that these matters will have a material adverse effect on our business,” Walmart wrote to investors in a regulatory filing in March, “given the inherent uncertainties in such situations, we can provide no assurance that these matters will not be material to our business in the future.”

Walmart could not immediately be reached for comment.

]]>http://fortune.com/2016/10/07/walmart-bribery/feed/0US-ECONOMY-STOREmichaladdadyThis Hedge Fund Is Expected to Pay $412 Million to Settle Bribery Probeshttp://fortune.com/2016/09/30/och-ziff-fine-bribe/
http://fortune.com/2016/09/30/och-ziff-fine-bribe/#respondFri, 30 Sep 2016 07:56:53 +0000http://fortune.com/?p=1812562]]>Och-Ziff Capital Management Group ozm will pay $412 million and CEO Daniel Och will pay $2.17 million to resolve U.S. probes into the hedge fund’s role in bribing officials in several African countries, U.S. authorities said on Thursday.

In the first U.S. foreign bribery case against a hedge fund, Och-Ziff subsidiary OZ Africa Management GP LLC pleaded guilty in federal court in Brooklyn to participating in a scheme to bribe officials in the Democratic Republic of Congo.

Och-Ziff meanwhile entered into a deferred prosecution agreement, in which charges related to conduct in Congo, Libya, Chad and Niger would be dropped after three years if it follows the terms of the deal.

“I’d like to emphasize that Och-Ziff has taken substantial remedial efforts to improve its compliance program to ensure something like this can never happen again,” Mark Schonfeld, a lawyer for the New York-based firm, told a federal judge.

In total, Och-Ziff will pay $412 million to resolve the U.S. Justice Department and U.S. Securities and Exchange Commission cases, $213 million of which constituted a criminal penalty. It also agreed to the appointment of an independent monitor.

Och agreed to pay $2.17 million to settle SEC charges that caused certain violations along with CFO Joel Frank, who also reached a settlement, the regulator said.

BRIBES TIED TO MINING, SOVEREIGN WEALTH FUND

The deals capped U.S. probes into the $39 billion hedge fund firm that centered in part on Michael Cohen, Och-Ziff’s former London-based head of European investing, who was responsible for investments in Libya and other African countries.

According to authorities, in 2008, Och-Ziff entered into a partnership with an Israeli businessman with close ties to high-level Congolese officials in order to fund his mining-related interests.

At least two employees, though, knew the businessman gained access to these investment opportunities by bribing officials, prosecutors said. Those employees, a person familiar with the matter said, were Cohen and an analyst, Vanja Baros.

Authorities did not name the businessman, whom they said had paid over $100 million in bribes to Congolese officials from 2005 to 2012. But the source said it was Israeli billionaire Dan Gertler.

Ronald White, Cohen’s lawyer, in a statement said “when all the facts are known, it will be clear that he has done nothing wrong.”

Gertler’s Fleurette Group declined comment. A lawyer for Baros did not respond to a request for comment.

Separately, beginning in 2007, an employee, who the source said was Cohen, engaged a London-based middleman to help it secure an investment from the Libyan sovereign wealth fund, the Libyan Investment Authority, prosecutors said.

Prosecutors said Och-Ziff received a $300 million investment into its hedge funds, and soon after entered into an agreement to pay a sham $3.75 million “finder’s fee,” which it knew would be used to pay Libyan officials in exchange.

The Justice Department said its investigation remains ongoing. The probe has resulted in one individual being criminally charged.

In August, Samuel Mebiame, a Gabonese man who U.S. authorities said acted as a “fixer” for a joint-venture involving Och-Ziff, was arrested and accused of engaging in a scheme to bribe officials in Africa to obtain mining rights.

A criminal complaint said Mebiame supplied cash and cars to two Niger officials; an S-class Mercedes Benz sedan and rented private Airbus jet to a Guinean official; and travel and shopping expenses for an adviser to Chad’s president.

A lawyer for Mebiame declined comment.

Och-Ziff shares closed up 5.65% at $4.49.

The cases in the U.S. District Court, Eastern District of New York, are U.S. v. OZ Africa Management GP LLC, No. 16-cr-00515, and U.S. v. Och-Ziff Capital Management Group LLC, No. 16-cr-00516.

This story has been updated.

]]>http://fortune.com/2016/09/30/och-ziff-fine-bribe/feed/0Daniel S. Och, chairman and chief executive officer of Och-Ztohm235Bribe Scandal Takes its Toll on Hedge Fund Platinumhttp://fortune.com/2016/06/15/platinum-hedge-fund-close-sack/
http://fortune.com/2016/06/15/platinum-hedge-fund-close-sack/#respondWed, 15 Jun 2016 12:13:35 +0000http://fortune.com/?p=1699646]]>U.S. hedge fund Platinum Partners is returning the majority of its assets to clients following the arrest of a longtime associate on allegations he orchestrated a $60,000 cash bribe to secure an investment from a New York city union.

New York-based Platinum told investors on a conference call on Tuesday that recent negative media attention and requests for the return of capital had forced it to begin the liquidation of its more than $700 million Platinum Partners Value Arbitrage Fund, according to a person familiar with the situation who requested anonymity because the information is private.

The firm is also considering shutting its Platinum Partners Credit Opportunities Fund, the person said. That strategy recently controlled more than $500 million, the balance of Platinum’s about $1.35 billion in overall assets as of April.

The development comes after the arrest last week of Murray Huberfeld, who was accused of bribing Norman Seabrook, the president of the New York City prison officers’ union.

Huberfeld is a longtime associate of Platinum head Mark Nordlicht. He was an early backer of Platinum and remains an investor in the firm. The Centurion Credit Management hedge funds he ran were also taken over by Nordlicht and Platinum in 2011.

According to a U.S. Department of Justice complaint against Huberfeld and Seabrook, an intermediary gave Seabrook a Salvatore Ferragamo bag filled with $60,000 in cash as the first of what was intended to be several kickbacks for ultimately steering $20 million of union money into Platinum’s coffers.

Nordlicht said on the conference call that the charges against Huberfeld were unfounded, the person said.

Huberfeld, through an attorney, declined to comment on the charges against him and the Platinum news. An external spokesman for Platinum did not respond to requests for comment. News of the liquidation was first reported by The Wall Street Journal.

Founded in 2003, Platinum has racked up profits that are the envy of the hedge fund industry. But its winning strategy of lending to troubled companies carries risks that many institutional investors would just as soon not take, according to a Reuters investigation earlier this year.

The soon-to-shut Value Arbitrage fund gained nearly 8 percent in 2016 through April, according to a private HSBC Alternative Investment Group report seen by Reuters. The fund produced average annual returns of more than 17 percent since inception in 2003 with no negative years.

The still-open credit fund has also never lost over a calendar year since inception in 2005. It has averaged annual returns of more than 13 percent, according to the private fund data seen by Reuters.

Nordlicht told investors on the call Tuesday that a decision on whether to shut the credit fund would come in a matter of weeks, the source said.

]]>http://fortune.com/2016/06/15/platinum-hedge-fund-close-sack/feed/0New York District Attorney Preet Bharara Announces Arrest Of Head Of Correction Officers' Benevolent AssociationgeoffreytsmithSeoul Prosecutors Raid Lotte Group, Casting New Doubt Over Hotel Unit IPOhttp://fortune.com/2016/06/11/lotte-group-raid-seoul-ipo-doubt/
http://fortune.com/2016/06/11/lotte-group-raid-seoul-ipo-doubt/#respondSat, 11 Jun 2016 14:47:13 +0000http://fortune.com/?p=1695295]]>South Korean prosecutors raided the offices of Lotte Group, the country’s fifth-largest conglomerate, and several affiliates on Friday, dealing a further blow to its hotel unit’s planned IPO, billed as the world’s biggest this year.

Hotel Lotte, one of the affiliates raided, cut the size of the deal to a maximum $4.5 billion on Tuesday and pushed back the listing to July after prosecutors launched a bribery investigation into a director.

Late on Friday, the group’s Lotte Chemical Corp unit said it withdrew from the bidding for U.S.-based Axiall Corp, which went to a rival suitor for $2.33 billion, citing “the difficult situation Lotte has faced in Korea recently and heated competition.”

About 200 investigators searched 17 locations including group headquarters in central Seoul and the homes of Chairman Shin Dong-bin and other key executives, local news agency Yonhap reported, citing the Seoul Central Prosecutor’s office.

The raids mark a fresh bout of turbulence for Lotte, one of the best-known of the big family-run conglomerates, or chaebol, that dominate Asia’s fourth largest economy, after it was rocked by a bitter succession feud last year.

A Lotte official, who declined to be identified due to the sensitivity of the matter, said Friday’s raids had not been expected. It was unclear whether there was a direct connection with the bribery probe into Hotel Lotte.

Three people with direct knowledge of the matter told Reuters that Friday’s raids were part of an investigation into a possible slush fund. They also declined to be identified.

One person said prosecutors were also looking into possible breach of trust related to asset transactions among affiliates. Some executives had been barred from leaving the country, one of the sources added.

The Seoul Central Prosecutors’ Office declined to comment.

A Lotte Group spokesman on Friday declined to comment on the reason for the raid, when asked whether it concerned a possible slush fund. He noted, however, that the situation was difficult given the IPO plans and Lotte Chemical’s Axiall bid.

“While cooperating with the investigation, we will do our best to operate normally,” he said.

A person working on the Hotel Lotte IPO, who declined to be identified, said bankers were awaiting further information.

“It complicates things considerably, of course,” the person said. “We don’t know what they were looking for, what they took.”

At the very least, another delay in its listing plans looms large.

According to bourse rules, the deadline for Hotel Lotte to list is July 27, six months from the preliminary approval for the IPO. If it needed to refile its prospectus to warn investors about risks from Friday’s probe, which appeared likely, it would probably not be able to meet that deadline, an exchange official told Reuters on Friday.

A Hotel Lotte spokesman said it was too soon to talk about any changes in IPO plans as investigations were ongoing.

Despite its name, Hotel Lotte’s biggest money-spinner is duty-free shopping, which accounted for 86% of first-quarter revenue. It is the world’s third-biggest operator of shops selling tax-free luxury goods and cosmetics to tourists.

On Friday, dozens of Chinese tourists queued as usual to access elevators to the flagship Lotte Duty Free outlet in the group’s headquarters complex, as TV cameras waited for investigators to emerge from office doors around the corner.

South Korea is the world’s largest duty-free market, and the bribery investigation is seen as a threat to Hotel Lotte’s bid for a coveted duty-free retail license in downtown Seoul due to be awarded in a bidding process later this year.

For more on the hotel industry, watch:

Named after the heroine of an 18th century Goethe novel, Lotte has grown from its founding in Japan 68 years ago as a maker of chewing gum to a corporate giant with interests ranging from hotels and retail to food and chemicals. The group has annual revenue of around $60 billion in Korea.

But last year’s highly public power struggle within the founding Shin family fueled resentment at the grip the chaebol hold over the economy. Some Koreans also criticized the group’s close ties with former colonial ruler Japan.

Shin Dong-bin, the younger son of the group’s founder, prevailed over his older brother to head the group.

Hotel Lotte’s planned flotation of around 35% of its shares was intended to bring transparency and improve corporate governance at a group whose ownership structure is convoluted even by the opaque standards of South Korea’s conglomerates.

Shin was in the United States attending an event at Axiall Corp, the Lotte Group spokesman said on Friday. He was due to return to South Korea next week.

His estranged brother Shin Dong-joo, who remains a shareholder in several companies, said in a statement that “huge problems with current management had once again come to the fore” and called for key shareholders to hold urgent talks.

]]>http://fortune.com/2016/06/11/lotte-group-raid-seoul-ipo-doubt/feed/0Lotte MallemmieodeaThe Ex-CEO of Calpers Is Going to Prison on Bribery Chargeshttp://fortune.com/2016/06/01/ceo-calpers-prison-bribery/
http://fortune.com/2016/06/01/ceo-calpers-prison-bribery/#respondWed, 01 Jun 2016 10:12:33 +0000http://fortune.com/?p=1680070]]>A former chief officer of Calpers, the nation’s largest public pension fund, was sentenced by a federal judge in San Francisco on Tuesday to 4-1/2 years in prison on a bribery conviction.

Federico Buenrostro, who served as chief executive officer of the California Public Employees’ Retirement System from 2002 to 2008, had admitted to accepting gifts, travel and other benefits totaling approximately $200,000.

The president of the Calpers Board of Administration, Rob Feckner, in a statement on Tuesday expressed relief that “this saga has now come to an end. We are stewards of a sacred trust, and it must never be compromised for personal gain.”

The public pension fund has incorporated a number of critical measures since 2009 to strengthen internal controls and risk management, improved accountability, and increased openness and transparency.

“This chapter in our history is now behind us, and Calpers has emerged a stronger, more dynamic organization,” Calpers CEO Anne Stausboll said in a statement.

Prosecutors said Buenrostro was involved in a scheme with Alfred J. Villalobos, a former member of the pension fund’s board, who later worked as a placement agent that solicited investments by public pension funds.

In 2014, Buenrostro pleaded guilty to bribery and fraud as part of a federal conspiracy case. Villalobos, who also faced federal corruption charges, died in 2015.

]]>http://fortune.com/2016/06/01/ceo-calpers-prison-bribery/feed/0CALpersimountThis Fuddy-Duddy Hedge Fund Is Being Rattled by a DoJ Bribery Probehttp://fortune.com/2016/04/13/hedge-fund-doj-bribery-probe/
http://fortune.com/2016/04/13/hedge-fund-doj-bribery-probe/#respondWed, 13 Apr 2016 09:52:10 +0000http://fortune.com/?p=1622225]]>For more than two decades, Och-Ziff Capital Management built itself into one of the world’s largest hedge fund firms by staying out of the limelight with its safe and steady investing style.

But its status as a darling of the $3 trillion hedge fund industry is under threat as it faces pressure from the U.S. Department of Justice to plead guilty to bribing government officials in Africa, according to a person familiar with the talks.

An Och-Ziff spokesman declined to comment.

The years-long bribery probe, first reported by The Wall Street Journal two years ago, had already rattled investors.

Its assets under management have dropped by $3 billion since the end of 2014, partly due to a weaker performance and investor withdrawals.

At least two investors who exited Och-Ziff last year said the bribery investment helped cement their decisions, said a person with first-hand knowledge of the moves who was not permitted to discuss them publicly.

On quarterly earnings calls, the firm has said little about the probe. In February its chief financial officer raised hopes that it may be wrapped up by the middle of the year, while noting that legal costs could rise for a while.

Och-Ziff is discussing a fine of $100 million to $400 million with regulators, according to the person familiar with the talks.

On Tuesday, several executives at pension funds said they felt Och-Ziff may have downplayed the probe’s complexity and potential consequences to them and asked lawyers to review whether there is a chance to exit the fund early.

“For any prudent fiduciary, this case would demonstrate that pensions don’t have the safeguards in place to monitor these investments and should get out,” said Edward Siedle, president of Benchmark Financial Services, which monitors pension funds.

One of the few publicly traded hedge funds in America, Och-Ziff was founded in 1994 by Och with $100 million from the wealthy Ziff family, heirs to a publishing fortune.

Not known for outsized gains or outsized losses, its steady investment returns--averaging 12% a year in its flagship OZ Master fund--have been a big attraction for institutional investors who have driven a near three-fold increase in its assets under management since 2005.

But for some investors that growth, plus its decision to go public in 2007, was offputting.

Smaller funds often deliver higher returns because they can make smaller bets and exit more quickly.

Although Och-Ziff’s hedge funds are private, they are run by a public company which requires the firm to pay attention to its stock price in addition to its investment returns.

“While we still have great respect for Och-Ziff, we grew uncomfortable with the notion of it becoming a public company, because that introduces troubling potential for a misalignment of interest between fund investors and the firm--with attendant asset growth being one of our concerns,” said Michael Hennessy, managing director at investment firm Morgan Creek Capital Management.

]]>http://fortune.com/2016/04/13/hedge-fund-doj-bribery-probe/feed/0The DOJ logo is pictured on a wall after a news conference in New YorkimountThe SEC Is Checking the ‘Panama Papers’ To See Who Paid Bribeshttp://fortune.com/2016/04/07/sec-panama-papers/
http://fortune.com/2016/04/07/sec-panama-papers/#respondThu, 07 Apr 2016 09:07:14 +0000http://fortune.com/?p=1616215]]>The U.S. Securities and Exchange Commission will review the leaked “Panama Papers” exposing holders of thousands of hidden bank accounts for possible violations of anti-bribery law, said the head of the agency’s unit that fights foreign corruption.

“Yes, we will be looking at it, as we do all public sources” that flag potential corruption-linked financial activity, said Kara Novaco Brockmeyer, chief of the SEC’s Foreign Corrupt Practices Act (FCPA) unit in answer to a question at an industry conference on Wednesday. The conference was sponsored by the Securities Industry and Financial Markets Association.

The SEC official did not elaborate on what the agency was reviewing in the leaked documents of Panamanian law firm Mossak Fonseca. The firm specializes in setting up offshore companies, often used to shelter the finances of politicians and public figures around the world.

Global scrutiny into offshore accounts detailed among the millions of leaked documents implicated scores of politicians and business figures internationally, though it has had limited fallout in the United States to date.

HIDDEN MONEY: CORRUPTION RED FLAG

Industry officials and regulators at the conference on anti-money laundering and financial crime said that laundered money is a red flag that points to a wide range of illegal practices, the most obvious being narcotics and terrorism network financing.

It also plays a lesser-known but critical role in many cases of bribery and corruption involving public officials and corporations subject to SEC oversight under the FCPA.

“There will be much for the SEC to review” in the massive leak of data on clients of the Panamanian law firm, said Ratan Narnolia, senior manager of Crowe Horwath’s anti-money laundering compliance consulting practice.

Mossak Fonseca has said it was the victim of a computer hack, and that it has consistently acted appropriately.

The case already claimed one head of state, Iceland’s Prime Minister Sigmundur David Gunnlaugsson, who stepped down after his wife’s secret offshore holdings were disclosed.

WHAT SEC WILL LOOK FOR IN PANAMA PAPERS

“The first thing the SEC will probably be doing is looking at names of U.S. corporations of individuals in the files. They need to cover their own risk,” Narnolia said. “They can’t go after everything. There are many countries looking and they will have their own investigations. The SEC needs to set a demarcation so they can focus on the top priority-any involvement of U.S. organizations or U.S. citizens.”

The agency will also likely decide which cases to pursue based on the amount of money that has been hidden in accounts, since its main concern is publicly traded international companies involved in corruption. The SEC also polices a large number of multinationals with U.S. operations, though it will likely stand aside to let country investigators take the lead with companies domiciled outside the U.S., anti-money laundering compliance experts said.

]]>http://fortune.com/2016/04/07/sec-panama-papers/feed/0SEC Approves Systemic-Risk Reporting Rule For Hedge Fund FirmsclairezillmanQualcomm Fined for Hiring Relatives of Chinese Officialshttp://fortune.com/2016/03/01/qualcomm-fined-hiring-relatives-of-chinese-officials/
http://fortune.com/2016/03/01/qualcomm-fined-hiring-relatives-of-chinese-officials/#respondTue, 01 Mar 2016 23:56:01 +0000http://fortune.com/?p=1568549]]>Qualcomm has agreed to pay $7.5 million to settle charges it violated U.S. anti-bribery laws by hiring relatives of Chinese officials to obtain business, the U.S. Securities and Exchange Commission said on Tuesday.

The Chinese officials related to Qualcomm’s new hires were deciding whether to select the company’s mobile technology products amid growing competition in the global telecommunications market, the SEC said.

The conduct, which included offering jobs to some individuals who fell short of hiring standards at the San Diego-based telecommunications company, occurred between 2002 and 2012, the SEC said.

Qualcomm qcom, which neither admitted nor denied the SEC’s findings, had previously disclosed the SEC probe, the company said in a statement. Qualcomm has taken additional steps to enhance its existing internal controls and procedures, it said.

The case is part of an SEC crackdown involving the hiring of “princelings,” the term used in Asia to refer to the children or younger relatives of China’s political leaders or top executives at state-owned enterprises. The practice could potentially violate U.S. anti-bribery laws.

HSBC, Europe’s biggest lender, disclosed on Feb. 22 that the SEC was also investigating its hiring practices in Asia. The SEC had also opened a probe into JPMorgan in 2013 regarding the hiring of princelings.

Improper hiring by Qualcomm included a situation in 2010, when a manager at a Chinese state-owned telecommunications company asked Qualcomm employees to find an internship at Qualcomm for her daughter. A Qualcomm employee noted the girl’s parents gave “great help” for Qualcomm’s business development, the SEC said in a settlement.

In another instance, Qualcomm gave financial support to the son of an executive at another state-owned company through a $75,000 research grant to an American university where he studied. The measure allowed the son to renew his student visa and retain his position in a PhD program.

The Chinese executive’s son was later a Qualcomm intern and then permanently employed, despite being deemed a “no hire” after company interviews.

A Qualcomm executive later personally loaned the employee $70,000 to buy a home.

For more on Qualcomm watch:

Qualcomm now closely monitors employment referrals to determine if candidates have relationships with employees of state-owned entities or government, the company said. It applies a stricter scrutiny to avoid potential future anti-bribery law risks, the company said.

The SEC also found that Qualcomm provided gifts, travel, and entertainment to try to influence officials at government-owned telecom companies in China.

Qualcomm lacked sufficient internal controls to detect those payments and misrepresented them in the company’s books and records as legitimate business expenses, the SEC said.

]]>http://fortune.com/2016/03/01/qualcomm-fined-hiring-relatives-of-chinese-officials/feed/0General Views of QualcommjppullenChina’s ZTE Under Investigation in Nigerian Security Network Failurehttp://fortune.com/2016/02/16/china-zte-nigeria-cctv-scandal/
http://fortune.com/2016/02/16/china-zte-nigeria-cctv-scandal/#respondTue, 16 Feb 2016 16:33:56 +0000http://fortune.com/?p=1549425]]>Chinese investment across the developing world has been a source of angst for U.S. business watchers over the past decade-- a symbol of China's growing global reach, and a tally of what can look like missed opportunities. But the story of one major project's descent from friendly photo-ops to acrimony and legislative hearings shows that those investment efforts often don't match the hype (or anxiety) surrounding them.

In 2010, Nigeria contracted China's ZTE Corporation to install a security communications network. The project included closed-circuit cameras intended to improve anti-terror monitoring in Abuja and Lagos, where attacks from groups like Boko Haram are a looming daily threat. But six years later, the $470 million National Public Security Communication System has come to next to nothing, with the system incomplete and effectively mothballed. Terror attacks and crime have continued, unmonitored.

In late January, a Nigerian congressional panel began hearings to determine what turned the half-billion dollar effort into a boondoggle of exploding batteries and cameras that see nothing. They heard he said-she said testimony faulting, on the one hand, slipshod work by ZTE, and on the other, government refusal to fund and maintain the system.

Though no official findings have yet emerged, the Nigerian media have pointed fingers at Nigerian leadership who both neglected due diligence and covered up evidence of substandard work and missing supplies for years. The government's agreement with ZTE was reached without a competitive bidding process, and reportedly contained language prohibiting public discussion of many aspects of the project. (ZTE did not respond to Fortune's request for comment on this story.)

According to Ed Marsh, a consultant who helps global companies work in Africa, the CCTV scandal shows how corruption has hampered Nigeria's efforts to upgrade unreliable roads, power grids, and data services.

"Up to this point, with very few exceptions," says Marsh, "The money that has been putatively earmarked for infrastructure has been squandered. There's often [just] enough [built] to provide plausible deniability."

Nigeria is Africa's biggest economy, with a growing middle class, booming film industry (known as Nollywood), and a promising tech sector. It's a place, Marsh attests, that many major companies would like to operate--if the wires and roads were more reliable. Marsh describes inconsistent power making basic computing difficult, even in high-end urban hotels. Many Nigerians carry multiple cell phones, because any one provider's towers might go out unexpectedly. Both urban and rural transportation systems are chaotic and decrepit.

For a time, it seemed like Chinese investment could be the answer. But Nigeria's security system isn't the only case in which that dream has gone sour. A Chinese-built hospital in Angola developed serious structural problems only four years after construction, and a Zambian road crumbled just as quickly. Huawei was convicted of bribery in connection with a telecom project in Algeria, and banned from bidding on contracts there for two years. Chinese firms have also been banned from bidding on World Bank projects because of corrupt practices.

There’s a dangerous synergy, it seems, between some African countries’ own endemic corruption and a Chinese business culture that, the Economist writes, “cares little about rules and regulations.” Both systemic corruption and the collapse of substandard roads and buildings are as common on mainland China as they are in Africa. Strict U.S. laws against engaging in corruption abroad are part of why U.S. companies have been slower to do business on the continent.

For more on tech investment in Africa, watch our video.

Despite that spotty track record, it seems Africa just can’t quit China, largely because many Chinese projects in Africa are funded by large loans from China's Export-Import (Exim) Bank. Chinese Exim funds have at times exceeded those of the World Bank, and can be simply irresistible to cash-strapped developing nations.

“African governments have no money for telecom projects and so China is using its financial muscle to get the contracts through loans,” Amos Kalunga, an analyst for the Computer Society of Zambia, told PC Advisor. The Nigerian CCTV project was backed by a Chinese Exim loan.

But Marsh says that Nigeria's ambitious urbanites are beginning to demand a higher standard for infrastructure projects and oversight, because they know development is crucial to their global future.

The most concrete sign of this sentiment is the election last March of President Muhammadu Buhari, who has a strong reputation for honesty (literally strong--he was briefly the nation's military dictator in the mid-'80s) and has kicked off a broad anticorruption initiative. The findings of the ZTE inquiry may become an early measure of Buhari's effectiveness at changing the game.

]]>http://fortune.com/2016/02/16/china-zte-nigeria-cctv-scandal/feed/0Xi Jinping Goodluck Jonathan 2013dzanemorrisTop sponsors call for FIFA president Sepp Blatter to resign immediatelyhttp://fortune.com/2015/10/02/coca-cola-fifa-blatter/
http://fortune.com/2015/10/02/coca-cola-fifa-blatter/#respondFri, 02 Oct 2015 19:44:07 +0000http://fortune.com/?p=1347095]]>FIFA’s tops sponsors–Coca-Cola, McDonald’s, Visa and Budweiser–publicly called for the organization’s president Sepp Blatter to resign on Friday. It follows the news from last week that Swiss prosecutors are investigating Blatter for “criminal mismanagement” and “misappropriation”.

Coca-Cola’s statement follows:

For the benefit of the game, The Coca-Cola Company is calling for FIFA President Joseph Blatter to step down immediately so that a credible and sustainable reform process can begin in earnest. Every day that passes, the image and reputation of FIFA continues to tarnish. FIFA needs comprehensive and urgent reform, and that can only be accomplished through a truly independent approach.

While Coca Cola is a valued sponsor of FIFA, Mr. Blatter respectfully disagrees with its position and believes firmly that his leaving office now would not be in the best interests of FIFA nor would it advance the process of reform and therefore, he will not resign.

Blatter announced his resignation in June, just days after the FIFA presidential election — an election he won despite the U.S. Dept. of Justice charging several high-ranking FIFA officials with corruption a week prior. However, Blatter told FIFA officials this week that he intends to hold his position until an election in February.

This is a developing story.

]]>http://fortune.com/2015/10/02/coca-cola-fifa-blatter/feed/0FBL-WC-2022-FIFA-QATdjbentleySwiss open criminal probe against FIFA’s Sepp Blatterhttp://fortune.com/2015/09/25/criminal-probe-sepp-blatter-fifa/
http://fortune.com/2015/09/25/criminal-probe-sepp-blatter-fifa/#respondFri, 25 Sep 2015 15:12:42 +0000http://fortune.com/?p=1331240]]>If Sepp Blatter thought that resigning his longtime perch as president of FIFA in June would allow him to retire quietly, he was very mistaken. On Friday the Attorney General of Switzerland, where the world’s governing soccer body is based, announced it has opened a criminal investigation into Blatter “on suspicion of criminal mismanagement” and “misappropriation.”

Blatter, you’ll recall, stepped down in June just one week after the indictments of nine FIFA officials in May. Blatter was not one of the nine arrested in a posh hotel in Zurich, but has been accused of accepting bribes from countries in exchange for World Cup bids. He has staunchly denied wrongdoing but did say when he resigned that FIFA, “needs a profound restructuring… My mandate does not appear to be supported by everybody.” (For the full background on all of this, see: Everything you need to know about FIFA corruption charges.)

Now the Switzerland Attorney General is investigating two specific contracts allegedly signed by Blatter: one made in 2005 with the Caribbean Football Union and its then-president Jack Warner, and one signed in 2011 with the Union of European Football Associations (UEFA) and its president Michel Platini. The Swiss AG’s office:

The OAG suspects that on 12 September 2005 Mr. Joseph Blatter has signed a contract with the Caribbean Football Union… there is as suspicion that, in the implementation of this agreement, Joseph Blatter also violated his fiduciary duties and acted against the interest of FIFA and/or FIFA Marketing & TV AG.

Additionally, Mr. Joseph Blatter is suspected of a disloyal payment of CHF 2 million to Michel Platini, President of Union of European Football Associations (UEFA), at the expense of FIFA, which was allegedly made for work performed between January 1999 and June 2002 ; this payment was executed in February 2011.

One of the biggest surprises of the probe is the explicit inclusion of Platini, who had not been previously implicated. (Warner, on the other hand, has been investigated for corruption on many occasions.)

The announcement from the Swiss AG concludes that “the presumption of innocence applies” for Blatter. FIFA’s critics and detractors, many of whom have railed of corruption for decades, may not feel that way as they read this news.

]]>http://fortune.com/2015/09/25/criminal-probe-sepp-blatter-fifa/feed/0Banknotes are thrown at FIFA President Blatter as he arrives for a news conference after the Extraordinary FIFA Executive Committee Meeting at the FIFA headquarters in ZurichDBRAlibaba exec and former Tencent employees detained by Chinese authoritieshttp://fortune.com/2015/07/09/alibaba-exec-tencent-employees-detained/
http://fortune.com/2015/07/09/alibaba-exec-tencent-employees-detained/#respondThu, 09 Jul 2015 20:58:15 +0000http://fortune.com/?p=1204382]]>In light of a recent internal investigation, a half dozen former Tencent Holdings Ltd employees and current Alibaba Group Holding Ltd executive Patrick Liu became entangled in a graft probe. "An internal investigation brought to light bribery and corruption among some online video employees,” Tencent said in a statement to Reuters.

Patrick Liu, president of Alibaba Group’s digital entertainment business unit, was the only name released of those detained.

“We understand Patrick Liu with our digital entertainment unit has been detained by the authorities. This issue is related to his time at Tencent and has nothing to do with Alibaba,” wrote Alibaba spokesman Robert Christie in an email.

]]>http://fortune.com/2015/07/09/alibaba-exec-tencent-employees-detained/feed/0General Economy Images In ShenzhendalyryanSepp Blatter’s resignation doesn’t let sponsors off the hookhttp://fortune.com/2015/06/02/sepp-blatters-resignation-sponsors-off-the-hook/
http://fortune.com/2015/06/02/sepp-blatters-resignation-sponsors-off-the-hook/#respondTue, 02 Jun 2015 18:48:56 +0000http://fortune.com/?p=1150995]]>On Friday, Sepp Blatter was reelected as the president of FIFA, the world’s governing soccer body, winning an unprecedented fifth term. Four days later, he has resigned the position.

It is unclear precisely what made Blatter change his mind, but it is unlikely that the tepid statements released thus far from FIFA’s corporate sponsors are to thank.

The likeliest candidate for what prompted Blatter’s 180-degree turn was a New York Times report on Monday evening that Jerome Valcke, FIFA’s secretary general and Blatter’s top lieutenant, personally handled the transfer of a $10 million bribery payment central to recent U.S. indictments against several FIFA officials. “The revelation puts the money trail closer to Mr. Blatter, FIFA's president, than had been previously known,” the Times wrote. (Nonetheless, Valcke has not been charged or indicted.) Prior to this latest report, even among all of the indictments and bad press, Blatter still wanted to serve.

As pressure mounted on FIFA over the past week, almost all of its eight official partners (Visa, Adidas, Coca-Cola, Gazprom, Hyundai, Kia, Budweiser and McDonald's) put out press statements shunning the organization and calling for change. “Hyundai Motor is extremely concerned about the legal proceedings being taken against FIFA executives and will continue to monitor the situation closely,” said Hyundai. “We… encourage FIFA to continue to establish and follow transparent compliance standards in everything they do,” said Adidas.

But none of them pulled their sponsorship dollars. And now that Blatter has stepped down, it may seem they won’t have to.

A bigger FIFA crisis remains largely unaddressed, however: In Qatar, at construction sites hurriedly preparing for World Cup 2022, migrant workers are dying at alarming rates. An urgent human rights crisis has unfolded, and FIFA’s corporate sponsors, for the most part, haven’t responded or called for anyone to step in. (The sports blog Deadspin ran the pointed headline, “FIFA sponsors double down on endorsement of slavery.”)

Visa did mention Qatar in its first (of two statements) last week. “We continue to be troubled by the reports coming out of Qatar related to the World Cup and migrant worker conditions," Visa said. "We have expressed our grave concern to FIFA and urge them to take all necessary actions.” The other sponsors that issued statements have focused on the corruption scandal.

FIFA has not taken action. There have been a reported 1,400 worker deaths at Qatar building sites since 2010 (a number that includes some workers not at World Cup sites). The International Trade Union Confederation, in a report called "The Case Against Qatar," estimates there will be another 4,000 deaths before the Cup arrives in 2022.

In his HBO show Last Week Tonight last Sunday, host John Oliver devoted an entire segment to the FIFA scandal and said sponsors are responsible for demanding that Blatter be removed. “All the arrests in the world are going to change nothing if Blatter is there,” said Oliver. Now he’s not there--but will his successor address the crisis in Qatar?

“The only people with the power to get rid of Sepp Blatter are FIFA’s sponsors,” Oliver said.” He then jokingly promised Adidas that he would wear one of its ugliest sneakers (a shoe designed by Jeremy Scott, part of the Adidas Originals line), McDonald’s that he’d eat its food, and Budweiser that he’d drink a Bud Light Lime, if they could cause Blatter’s ouster.

The news that Blatter is stepping down is a shock to everyone involved in the corruption scandal that has been brewing for decades (24 years, by the U.S. Department of Justice’s count) and reached a boil last week with the arrests of nine FIFA officials in Switzerland. It is a shock to the reporters that have covered the scandal, a shock to soccer fans, and, most likely, a shock to the FIFA delegates, from 209 member associations, who reelected Blatter last week.

In a hasty press conference on Tuesday, he was vague about the reasons for his resignation, merely alluding to signs that FIFA needed new leadership. “FIFA needs a profound restructuring,” he said. “For many years we have called for reforms, but these are not sufficient.” Of his own leadership, he added, “My mandate does not appear to be supported by everybody.”

The next FIFA congress won’t take place until May 2016, but Blatter is calling for an “extraordinary” special election to find his replacement. That could take another four months to assemble; in the meantime Domenico Scala, head of FIFA’s audit and compliance committee, will manage the transition.

FIFA’s sponsors may be resting easy now--change has come to the organization, and many people are rejoicing. But as the heat in Qatar rises in the summer months, the heat on sponsors won’t dissipate until the labor situation is addressed. It’s still on the corporations--those that give FIFA $400 million a year in sponsorship money--to speak up.

]]>http://fortune.com/2015/06/02/sepp-blatters-resignation-sponsors-off-the-hook/feed/0Fifa Arrests 2015DBREverything you need to know about the FIFA corruption chargeshttp://fortune.com/2015/05/27/fifa-corruption-charges-sepp-blatter/
http://fortune.com/2015/05/27/fifa-corruption-charges-sepp-blatter/#respondWed, 27 May 2015 15:09:58 +0000http://fortune.com/?p=1138525]]>It’s the major global news story of the day: FIFA, the governing body for world soccer, has been slammed with U.S. corruption charges.

For those that don’t know much about the organization beyond the fact that it operates the World Cup every four years, here’s everything you need to know about its recent history, why the charges are coming now, and what the charges could mean for the future of the sport.

What is FIFA, again?

It’s the F?d?ration Internationale de Football Association, based in Zurich, formed over 100 years ago to handle the organization and promotion of the world’s biggest football tournaments (you may know the sport as “soccer”), including the World Cup and the Women’s World Cup. FIFA does not set the rules of the sport, but it carries out the scheduling and marketing, sets policy, and oversees more than 200 member countries or associations, all of which also belong to one of the six regional confederations (such as UEFA for Europe and CONCACAF for North and Central America). This is huge business: the 2014 World Cup alone brought in an estimated $4 billion for FIFA, mainly from TV rights fees and corporate sponsor fees.

Who runs it?

FIFA’s president is a man named Josef “Sepp” Blatter, who was first elected in 1998 and has since been reelected four times, despite being widely criticized and accused of corruption. He is currently running for a record fifth term and is expected to get it.

Oh, and today Blatter was indicted on corruption charges?

Nope. Blatter was notably not one of the nine FIFA officials (and five sports marketing executives) arrested by Swiss police on Wednesday morning in a fancy (we’re talking $4,000-a-night fancy) hotel in Zurich and indicted on 47 counts including racketeering, wire fraud and money laundering. But those 14 people do include some of the highest-ranking FIFA officials, like former FIFA vice president Jack Warner and current vice president Jeffrey Webb.

Is this the first time there have been allegations of bribery at FIFA?

Certainly not. The organization has been accused of corruption for decades, but the “heat” has risen ever since FIFA awarded the 2018 World Cup to Russia and the 2022 World Cup to Qatar. In June of last year, the (U.K.) Sunday Timesreported that Qatari politician Mohamed bin Hammam, a former member of the FIFA executive committee (the “Exco”) paid $5 million in bribes to influential FIFA executives, including Jack Warner, in exchange for World Cup bid votes. (Back in 2011, former FBI director Louis Freeh, now a private investigator, was hired to investigate alleged bribery by the same person, Mohamed bin Hammam, and Freeh's report, which did find evidence of bribery, led to a lifetime ban; bin Hammam appealed that to the Court of Arbitration for Sport, which overturned it in July 2012, but FIFA banned bin Hammam again in December 2012 on new grounds after further investigation.)

Now Warner is back under fire, along with the other FIFA executives, but not just over the allegations of bribery in the World Cup 2022 bid process. Today’s charges are also about the wide-ranging history of alleged corruption at the organization. U.S. Attorney-General Loretta Lynch said in a statement that the Department of Justice indictment is over “corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States. It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks." Lynch estimates the total amounts of bribes at more than $150 million.

Wait, the charges came in the U.S., but the FIFA folks were arrested in Switzerland?

Indeed. The Swiss police that made the arrests were acting on a request from U.S. officials in New York. According to the DOJ indictment, the FIFA crimes fall under U.S. jurisdiction because they were planned in the U.S. and carried out through U.S. banks. Some could see this as yet another example of the U.S. playing world policeman--attempting to bring to justice an organization that is based outside the U.S. and does most of its business outside the U.S. However, this is one potential overstep that is likely to receive almost global support and praise.

Wow. So, will FIFA pull the 2022 Cup from Qatar?

Don’t bet on it--at least not yet. FIFA spokesman Walter de Gregorio, in response to the arrests, was quick to say that there still would not be a revote for the 2018 and 2022 World Cup bids: "That is what is fact today. I won't go into speculation on what may happen tomorrow."

And yet, alleged corruption in the bidding process has hardly been the only problem with the Qatar World Cup plan. First, reports of the intense heat there in the summer months led FIFA to move the schedule for the first time ever: its plan is for the 2022 Cup to be played in the winter months. This led European clubs to react strongly and demand they be compensated for the effect on their normal soccer schedules. FIFA said no. Now there have been reports of worker deaths at the construction sites in Qatar where fields and stadiums are being urgently erected to be ready in time: there have been 1,420 confirmed deaths already, and a new campaign led by the International Trade Union Confederation, a global trade group representing workers' rights, suggests there will be 62 worker deaths for each World Cup game played in Qatar. As a result, major World Cup sponsors like Visa and Adidas have issued stern statements of concern, but have not pulled their sponsorships. (And today’s indictments do not appear to be focused on the labor conditions.)

What does Qatar say about that?

Qatar’s general attitude can be summed up by the fact that it invited a BBC camera crew to film the conditions for migrant laborers, then arrested and detained the crew for doing just that.

So, what happens next?

Loretta Lynch and FBI officials held a press conference in New York today to expand on the charges. Kelly Currie, acting U.S. Attorney for the Eastern District of New York, said at the event that this is only the beginning of the crackdown on FIFA: “I want to be very clear: this is the beginning of our effort, not the end… as we continue our effort in ridding global soccer of this corruption.” Even FBI director James Comey stepped to the microphone and said, “If you touch our shores with your corrupt enterprise… you will be held accountable for that corruption. Nobody is above or beyond the law. The game was hijacked… That field that is so famously flat was made tilted in favor of those looking to gain at the expense of countries and kids who were enjoying the game of soccer.” (Of course, the very first question asked in a Q&A after the press conference was why Blatter was not indicted; Loretta Lynch would not comment on Blatter.)

Consider the press conference a public display of muscle--one that many were waiting to see for years. But whether the executives will serve time remains to be seen. And most in doubt is the fate of Qatar’s bid. Don’t expect FIFA, and Blatter, to yank the Cup from Qatar without a fight.

Does all of this mess with Blatter, even though he wasn’t indicted?

The arrests come just days before the election for FIFA president--Blatter was expected to win a fifth term. Will these arrests ruin his run? Maybe not in the short term. Most of his opponents, like former Real Madrid star Luis Figo, have already withdrawn, claiming that the process has been rigged in Blatter’s favor. But the DoJ’s trail of bribes and kickbacks goes back 20 years, a time in which Blatter’s control of FIFA has been near-absolute. It’s unlikely that he can disclaim responsibility for everything that’s happened in that time, and it is just as unlikely that none of the accused will prefer a guilty plea implicating Blatter to a lengthy stretch in a U.S. prison.

]]>http://fortune.com/2015/05/27/fifa-corruption-charges-sepp-blatter/feed/0Sepp BlatterDBRAlstom to pay record $772 million to settle bribery chargeshttp://fortune.com/2014/12/22/alstom-to-pay-record-772-million-to-settle-bribery-charges/
http://fortune.com/2014/12/22/alstom-to-pay-record-772-million-to-settle-bribery-charges/#respondMon, 22 Dec 2014 16:10:14 +0000http://fortune.com/?p=916580]]>The French firm Alstom SA has pleaded guilty and will pay $772 million in criminal penalties to settle charges with the U.S. Justice Department alleging the company bribed government officials to win business in Indonesia, India and China.

The settlement announced by the Justice Department on Monday marks the largest-ever criminal fine levied by the United States against a company for violations of foreign bribery laws.

Earlier on Monday, a unit of Alstom and two employees were also charged by the Serious Fraud Office in the United Kingdom with bribing officials from 2002 through part of 2010.

Alstom’s power turbines unit has already been under tremendous heat, both because of the looming bribery probe fines and from a drop in orders and a cash crunch.

In June, the company agreed to sell most of the power business to General Electric Co. so it could turn its attention to its smaller rail unit instead.

]]>http://fortune.com/2014/12/22/alstom-to-pay-record-772-million-to-settle-bribery-charges/feed/0FRANCE-GERMANY-US-ENGINEERING-ALSTOM-SIEMENSrolandattimeincAlstom nearing U.S. bribery settlementhttp://fortune.com/2014/12/16/alstom-us-settlement/
http://fortune.com/2014/12/16/alstom-us-settlement/#respondTue, 16 Dec 2014 16:06:07 +0000http://fortune.com/?p=906707]]>Alstom SA is reportedly close to paying nearly $700 million to the U.S. to settle bribery probes, a potential deal that comes before the closure of General Electric’s $17 billion bid to buy the company’s energy unit.

Media reports said the fine would be the largest criminal penalty paid to the Justice Department under the Foreign Corrupt Practices Act and a settlement could be announced as early as next week, according to Bloomberg, which cited a person familiar with the matter. Bloomberg estimated the settlement could reach $700 million, while Dow Jones reported the settlement would be “more than $500 million.”

An Alstom representative wasn’t immediately available to comment on the bribery settlement chatter.

The U.S. probe focused on a $118 million contract to provide boiler services at a power plant in Sumatra, an island in Indonesia. Alstom executives allegedly used middleman to funnel hundreds of thousands of dollars to a member of Indonesia’s parliament and officials at a state-controlled electricity company, according to Bloomberg, which cited court papers filed by the Justice Department in related cases.

The potential settlement comes ahead of a planned Alstom shareholder vote that will be held later this week. GE GE in June agreed to buy the company’s power and grid businesses in a deal that is expected to close next year.

]]>http://fortune.com/2014/12/16/alstom-us-settlement/feed/0Alstom SA's Industrial Welding SchooljohnnerkellGlaxoSmithKline fined nearly $500 million in China bribery casehttp://fortune.com/2014/09/19/glaxosmithkline-china-fine/
http://fortune.com/2014/09/19/glaxosmithkline-china-fine/#respondFri, 19 Sep 2014 11:44:50 +0000http://fortune.com/?p=793607]]>GlaxoSmithKline has agreed to pay a nearly $500 million fine to the Chinese government after an investigation found a subsidiary of the British pharmaceutical giant offered bribes to non-government personnel.

As a result of a court ruling in China, the company’s subsidiary, called GSK China Investment Co., will pay a fine of ?297 million ($487 million) to the Chinese government. The penalty is the largest ever corporate fine in China, The Wall Street Journal reported, citing official Chinese news agency Xinhua.

“Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK,” said Chief Executive Sir Andrew Witty in a statement. “We have and will continue to learn from this.”

The court found that GlaxoSmithKline’s subsidiary had offered money or property to non-government personnel in order to obtain improper commercial gains, according to the drug maker’s statement, and had been found guilty of bribing individuals in China.

GlaxoSmithKline said as a result of the bribing incident, it has changed its incentive program for its salesforce and expanded processes for review and monitoring of invoicing and payments, among other preventative measures to halt future bribery. The company intends to pay the fine through existing cash resources and claims associated costs and charges will be included in the company’s third-quarter results.

]]>http://fortune.com/2014/09/19/glaxosmithkline-china-fine/feed/0BRITAIN-PHARMACEUTICAL-GSKjohnnerkellWhen corruption is good for the economyhttp://fortune.com/2014/08/07/corruption-economic-benefits/
http://fortune.com/2014/08/07/corruption-economic-benefits/#respondThu, 07 Aug 2014 17:53:48 +0000http://fortune.com/?p=765752]]>Americans, and citizens around the world, have corruption on the mind.

A recent Gallup poll showed that from 2006 to 2013, the percentage of Americans who believe “corruption is widespread throughout the government” has increased from 59% to 79%, while a separate poll showed that majorities in 108 of 129 countries agree.

Economist Jakob Svensson has defined corruption as the misuse of public office for private gain and, by this definition, it’s easy to see why it upsets us so much, as it constitutes a theft of resources that belong to all of us. And when corruption is widespread, it can have devastating effects on a society. In a paper published in the Journal of Economic Perspectives, Svensson surveys the literature on the economic effects of corruption, and they can be severe. He notes that there is a strong negative correlation between the wealth of a nation and its level of corruption, and that this corruption often harms the poorest in a society. Svensson offers several recent examples of such egregious malfeasance:

A conservative estimate is that the former President of Zaire, Mobutu Sese Seko, looted the treasury of some $5 billion…. The funds allegedly embezzled by the former presidents of Indonesia and Philippines, Mohamed Suharto and Ferdinand Marcos, are estimated to be two and seven times higher…. An internal IMF report found that nearly $1 billion of oil reserves, or $77 per capita, vanished from the Angolan state coffers in 2001 alone. This was about three times the value of the humanitarian aid received by Angola in 2001--in a country where three-quarters of the population survives on less than $1 a day and where one in three children die before the age of five.

Of course, most corruption is nowhere near as outrageous, and there are times when the presence of corruption can actually lead to just outcomes. According to Chris Blattman, an associate professor of political science at Columbia University, this might be why economists have not been able to link levels of corruption to growth rates. While overall wealth is associated with lower levels of corruption, there is very little evidence that corruption leads to slower economic growth. Writes Blattman:

Why might this be so? One reason: Most of us fail to imagine that corruption can also grease the wheels of prosperity. Yet in places where bureaucracies and organizations are inefficient (meaning entrepreneurs and big firms struggle to transport or export or comply with regulation), corruption could improve efficiency and growth. Bribes can act like a piece rate or price discrimination, and give faster or better service to the firms with highest opportunity cost of waiting.

Could this seemingly benign corruption be helpful in the U.S.? In an article in this week’s New Yorker, Malcolm Gladwell, without necessarily calling it corruption, argues it could, as he compares the Italian Mafia of the early 20th century with organized crime in cities today. Gladwell argues that throughout American history, waves of immigrants were denied access to the sorts of institutions that would have enabled upward mobility, and when that happened, these groups turned to crime, what sociologist James O'Kane calls “the crooked ladder.”

But, in the 1970s, as the U.S. government got serious about cracking down on organized crime in general and the drug trade in particular, that crooked ladder was destroyed, leaving today’s downtrodden minorities with one fewer avenue to gain wealth. It was once common to bribe police officers to turn a blind eye to the drug trade, illegal gambling, and prostitution. But America’s zeal for stamping out crime and vice has transformed the unwritten armistice between organized crime and the authorities to an all-out war, in which minority youth are imprisoned and subsequently forced back into a life of crime due to the stigma against felons.

On a national level, we can see how corruption can actually make Congress more efficient. For four years, the House of Representatives has been operating under a ban of so-called “earmarks,” or spending provisions tacked on to a larger bill that fund pet projects of a specific congressman that bill sponsors are trying to woo. This is, of course, bribery by any other name: “Vote for this bill and we’ll give you something you want.” At the same time, since earmarks have been banned, Congress has been unable to get much of anything done, leading politicians on both sides of the aisle and countlesscommentatorsto beg for their return.

Most of the time, corrupt officials are like parasites that feed off society and benefit only themselves. Furthermore, as corruption becomes more prevelant, ethical people lose faith in the system and are sapped of their drive to work honestly. But it’s important to understand that because we live in an imperfect world, a bit of controlled corruption can function as a lubricant to overcome some of our worst problems.

]]>http://fortune.com/2014/08/07/corruption-economic-benefits/feed/0christopherrmatthewsF1 head Ecclestone settles bribery charges for $100 millionhttp://fortune.com/2014/08/05/f1-head-ecclestone-settles-bribery-charges-for-100-million/
http://fortune.com/2014/08/05/f1-head-ecclestone-settles-bribery-charges-for-100-million/#respondTue, 05 Aug 2014 14:13:38 +0000http://fortune.com/?p=764440]]>Motor racing impresario Bernie Ecclestone is a free man again, after a court in Munich, Germany accepted his offer to pay $100 million to settle charges of bribery, the largest settlement of its kind in German history.

The court’s decision represents a remarkable outcome to one of the biggest bribery trials in recent history in Europe–and one that had seemed unlikely after the man on the other side of the deal in question, German banker Gerhard Gribkowsky, had already been convicted.

The 83 year-old head of the multi-billion dollar travelling circus that is Formula 1 has been on trial in Munich since April. He was accused of paying Gribkowsky, formerly chief risk officer with Munich-based regional lender Bayerische Landesbank, $44 million to ensure that the bank sold its controlling stake in F1 to CVC Capital Partners at a below-market price, on the understanding that CVC would keep Ecclestone in charge of the business.

Ecclestone, who has built up F1 into one of world sport’s most valuable franchises over 40 years, denied the charges. He claimed Gribkowsky had blackmailed him into paying the money. Gribkowsky is currently serving an eight-year sentence, after being convicted in 2012.

In addition to the court settlement, Ecclestone has also offered EUR25 million to settle a separate claim for damages from BayernLB, a person familiar with the matter told Fortune. BayernLB’s management will likely decide this week whether or not to accept that, he added.

German media reported Tuesday that presiding Judge Peter Noll had said that “to a substantial degree”, the suspicions against Ecclestone had not been confirmed in the course of the hearings, and that the panel of judges thought there was little likelihood of more conclusive proofs being presented.

He denied suggestions that Ecclestone had been allowed to “buy off” the court.

“That is not a deal. That has nothing to do with buying a free pass,” the news agency dpa reported Noll as saying.

The newspaper Frankfurter Allgemeine Zeitung cited prosecutor Thomas Steinkraus-Koch as saying that Ecclestone had admitted he had acted wrongly and had contributed to clearing the affair up. He also noted that Ecclestone’s age and doubts over his ability to complete a jail sentence had also played a role in his agreeing to drop the charges.

]]>http://fortune.com/2014/08/05/f1-head-ecclestone-settles-bribery-charges-for-100-million/feed/0Ecclestone Seeks Settlement To End Trialgeoffreytsmith